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As Home Insurance Costs Soar, 6 Million Owners Decide to Skip Coverage Altogether
By Pete Grieve MONEY RESEARCH COLLECTIVE
Average annual home insurance premiums are up about $500 over the past two years.
As costs rise nationally, more than six million homeowners are reportedly skipping home insurance, which adds up to a total of $1.6 trillion worth of unprotected houses.
A new study by the Consumer Federation of America, an association of nonprofit consumer organizations, finds that 7.4% of homeowners don’t have insurance, leaving them exposed to major risks if their homes become damaged. Uninsured rates are much higher for Black homeowners (11%) as well as Hispanic homeowners (14%).
High rates of uninsured homeowners are seen in many rural areas, but specific major cities including Miami and Houston also have elevated rates of 15% and 10%, respectively.
The rising cost of home insurance is likely causing more people to go without home insurance.
According to the study, which is based on 2021 Census data, the percentage of uninsured homeowners has increased since 2019 when 6.5% lacked coverage. The researchers forecast that the share of owners without insurance will jump even higher due to “escalating home insurance premiums and insurance companies leaving disaster-prone states altogether.”
The national average annual cost of home insurance climbed to $1,723 in 2023, up from $1,276 in 2021, according to Guaranteed Rate Insurance, a national brokerage. Insurance companies say they’re increasing premiums because they’re facing costly claims from major disasters while the cost of home repairs has soared with inflation.
Why homeowners are skipping insurance
Home insurance is a requirement for Americans with mortgages. However, it’s equally important for homeowners who don’t have mortgages to get insurance, even if it’s not required.
If a disaster hits, homeowners who don’t have insurance risk going into major debt or being forced to live in an unsafe dwelling with an issue like a damaged roof, for example. FEMA assistance grants can provide some relief, but they’re only available after declared disasters.
In the worst case scenario, you could be left with no way to pay for hundreds of thousands of dollars of repairs after a disaster, Sharon Cornelissen, director of housing at the CFA, said in a release.
Americans who skip home insurance are often lower-income homeowners struggling financially. The report found that 15% of homeowners earning less than $50,000 per year are uninsured, compared to just 3% of owners earning $150,000 or more.
“Many consumers are struggling to afford rising premiums and must go without homeowners insurance,” Cornelissen said. “That puts them at risk of losing everything. One storm or wildfire means they have to go into deep financial debt to repair their home, live with unsafe and inadequate housing, or even become homeless.”
More from Money:
7 Best Homeowners Insurance Companies of February 2024
More People Are Skipping Home Insurance to Save Money — and It Could Backfire
Home Insurance Prices Are Soaring — Especially in These 5 States
Pete Grieve is a New York-based reporter who covers personal finance news. At Money, Pete covers trending stories that affect Americans’ wallets on topics including car buying, insurance, housing, credit cards, retirement and taxes. He studied political science and photography at the University of Chicago, where he was editor-in-chief of The Chicago Maroon. Pete began his career as a professional journalist in 2019. Prior to joining Money, he was a health reporter for Spectrum News in Ohio, where he wrote digital stories and appeared on TV to provide coverage to a statewide audience. He has also written for the San Francisco Chronicle, the Chicago Sun-Times and CNN Politics. Pete received extensive journalism training through Report for America, a nonprofit organization that places reporters in newsrooms to cover underreported issues and communities, and he attended the annual Investigative Reporters and Editors conference in 2021. Pete has discussed his reporting in interviews with outlets including the Columbia Journalism Review and WBEZ (Chicago's NPR station). He’s been a panelist at the Chicago Headline Club’s FOIA Fest and he received the Institute on Political Journalism’s $2,500 Award for Excellence in Collegiate Reporting in 2017. An essay he wrote for Grey City magazine was published in a 2020 book, Remembering J. Z. Smith: A Career and its Consequence.